Performance Measurement

 To link compensation and rewards to performance.

 To identify salespeople capable of promotion.
 To identify training and counseling needs.
 To identify criteria for recruitment and selection.
 To clarify work expectations.
 To motivate salespeople.
 To help salespeople set career goals.
Sales Management

communication skills, product knowledge,

Qualitative attitude, selling skills, initiative/aggressiveness,
factors appearance/manner, and knowledge of the
competition

sales volume in dollars, sales volume to previous

Quantitative year’s sales, number of new accounts, net dollar
factors profits and sales volume by dollar quota

 Sales managers should provide

continual guidance and feedback
 Use more quantitative methods of
evaluation to reduce bias in the
evaluation process Dr. Rosenbloom
 Aptitude
 Skills Level
 Motivational Level
 Role Perceptions
 Personal
Characteristics
 Adaptability

Dr. Rosenbloom
 A Sales Force Evaluation Model
Set goals and objectives for
sales force, including:
Revenues
Contribution profits
Market share
Expense ratios

Design sales plan

Set product performance standards for:

Organization Salespeople
Regions Accounts
Districts

Measure results
Take Corrective Action
against standard
Output Measures Used in Sales
Force Evaluation
Table 13-1 Output Measures Used in Sales Force Evaluation
Sales Profit
Sales volume dollars Net profit
Sales volume previous year’s growth Gross margin percentage
Sales to quota Return on investment
Sales growth Net profit as a percentage of sales
Sales volume by product Gross margin dollars
Sales volume by customer Margin by product category
New account sales Accounts
Sales volume in units Number of new accounts
Sales volume to potential (market Number of accounts lost
share)
Orders Number of accounts sold
Number of orders Number of accounts buying full line
Average order size
Batting average (orders/calls)
 Output Measures Used in Sales
Force Evaluation
Percent Percent
Performance Measure Using Performance Measure Using

Sales Profit
Sales volume dollars 79% Net profit 69%
Sales volume previous year’s sales 76 Gross margin percentage 34
Sales to quota 65 Return on investment 33
Sales growth 55 Net profit asa percentage of sales 32
Sales volume by product 48 Margin by product category 28
Sales volume by customer 44 Gross margin dollars 25
New account sales 42
Sales volume in units 35
Sales volume to potential 27 Orders
Accounts Number of orders 47
Number of new accounts 69 Average size of order 22
Number of accounts lost 33
Number of accounts buying full line 27
 Input or Behavior Bases Used in
Sales Force Evaluation
Table 13-2 Input or Behavior Measures Used in Sales Force Evaluation

Expenses Effort

Total expenses Number of calls

Selling expenses to budget Number of calls per day

Selling expenses as a percentage of Number of calls to quota

sales
Nonselling Activities Number of days worked

Advertising displays set up Number of reports turned in

Number of service calls Number of prospecting phone calls

Number of customer complaints Selling time vs. non-selling time

 Input or Behavior Bases Used in
Sales Force Evaluation
Percent Percent
Base Using Base Using

Selling expenses to budget 55% Number of calls per day 42%

Total expenses 53 Number of reports turned in 38
Selling expenses as a % of sales 49 Number of days worked 33
Number of calls 48 Selling time vs. nonselling time 27
Qualitative Bases Used in Sales
Force Evaluation
Table 13-7 Qualitative Bases Used in Sales Force Evaluation

Attitudinal and Personality Factors Time management

Attitude Ability to plan

Enthusiasm Appearance and manner

Cooperation Knowledge

Creativity and resourcefulness Product knowledge

Initiative and aggressiveness Pricing knowledge

Motivation Knowledge of competition

Selling Skills Ethical and moral behavior

Communication Skills Team player

 Qualitative Bases Used in Sales
Force Evaluation
Percent Percent
Base Using Performance Measure Using

Communication skills 88% Time management 63%

Product knowledge 85 Cooperation 62
Attitude 82 Judgment 62
Selling skills 79 Motivation 61
Initiative and aggressiveness 76 Ethical/Moral behavior 59
Appearance and manner 75 Planning ability 58
Knowledge of competition 71 Pricing knowledge 55
Team player 67 Report preparation and submission 54
Enthusiasm 66 Creativity 54
Evaluating Sales Force
Performance: Cost Analysis

 What costs are relevant?

Net Sales
Less Variable Costs: Cost of Goods Sold (CGS)
Sales Commissions
Equals: Contribution Margin
Less: Direct Fixed Selling Costs
Equals: Profit Contribution
Evaluating Sales Force
Performance: Product Costs

 CGS + Commissions higher for computers

◦ paying too much for parts
◦ competition has driven down selling prices
◦ salespeople cutting computer prices to make deals --
possible actions:
 limit price negotiation capabilities
 shift to a gross margin commission
 change commission structure to emphasize
accessories and software
A Model of Salesperson Evaluation

Input-based System Output-based System

Behavior Results
Calls Sales revenues
Reports Sales growth
Complaints Sales/quota
Salesperson
Demonstrations Sales/potential
Evaluation
Dealer meetings New accounts
Display set up Contribution margins
Travel/entertainment Contribution
expenses percentage
Outcome Behavioral
Systems(OS) System(BS)
• Customers need • Salespeople lack
information experience
• Customers trust • No need to protect
the salesperson the brand image
• There are ways to • Nonselling
close the deal behaviors are a
• Sales environment priority
is competitive • Difficult to assign
sales credit
Call Productivity Ratios

Sales to Account = Dollar Sales

# Accounts

Average Order Size = Dollar Sales

# Orders

Growth Ratio = # New Accounts

Total # Accounts

Account Success = Accounts Sold

Total # Accounts
Expense Ratios

Expense to Sales = Expenses

Sales

Cost per Call = Total Costs

# of Calls
Account Related Ratios

Sales to Account = Dollar Sales

# Accounts

Average Order Size = Dollar Sales

# Orders

Growth Ratio = # New Accounts

Total # Accounts

Account Success = Accounts Sold

Total # Accounts
Models Combining Input & Output
Controls: Ranking Procedures

 Widely used, simple to use, easy to understand

 Add ranks for overall performance measure
 Alternatives to sales/salesperson
 Sales to potential -- good coverage of (limited) market
 Sales to quota -- ability to increase revenue
 Sales per order -- profitability relative to size of customer
 Batting average -- efficiency of calls
 Gross margin percentage -- ability to control price
selling best mix of products
 Variation -- weight importance of each criterion
Cost Analysis

 Object affects direct vs. indirect cost

classification:
Cost By Territory By Product
P-O-P Display Direct Direct

Salesperson Salary Direct Indirect

Product Manager Salary Indirect Direct

VP Operations Salary Indirect Indirect

Evaluating Sales Force
Performance: Account Cost to Serve

Total Cost to Serve Account

Cost to Serve =
Revenue from Account

 Usually decline with revenue

 Help identify best accounts
 Downsizing & Profits
 Consider using DEA (Programming)
Evaluating Sales Force Performance:
Fleet Car Management -- A Motivator

 Salesperson owned car (per mile travel allowance)

◦ Salesperson gets car preference
◦ Allowances rarely cover full salesperson car costs
 Company owned & managed cars
◦ Ties up a lot of cash
◦ Costs less than salesperson owned car
 Leased sales fleet of cars
◦ Frees up cash
◦ Company performs routine maintenance
Models Combining
Input and Output Controls

 Four Factor Model

Calls Orders Sales $
$ Sales = Days worked x
Days Worked Calls Orders

$ Sales = Days worked x Call Rate

Batting Average
Average Order Size

◦ How can sales be increased?

◦ Optimum number of sales calls to maximize profits?
◦ Who is doing better?
◦ What management strategies for ?